convergence zone, a very sharp eye on this system. and jacqui jeras will be in with the laest. could be a major hurricane by possibly the late half of next week. >> probably just in time for the weekd. that's usually the way it es. >> it always seems that way. >> reynolds, appreciate that. have a great day, too. later on, 2:00 eastern hour. protesters for and again the islamic center hitting the streets, along with our reporters. we'll give you updates. and wee taking an in-depth look at the heart of this angry standoff. "your $$$$$" starts right now.te here is what the president has proposed this past week. $50 billion in infrastructure

spending money that is meant to be spend on high-speed rail, improving runways, buildinghi roads, the type of thing where you see construction money going right toanonstruction companies and workers, $100 billion in the extension of an existing tax credits toho companies who inve money in research and development, and $200 billion as a new tax credit to companies who build physical plants, buildings, or invest in equipment. let's go to diane swann. diane, this is $350 billion in commitments, putting aside her is can even get through congress before the midterm elections, is this too little too late? or could this actually work? >> the problem is the lag times, particularly on infrastructure programs, is it won't so long it won't do anything for the end of the year. much of the stimulus that was earmarked for infrastructure has

not yet been spend, only $18 billion of $93 billion spent. so we have a lot of money in the pipeline, and to add insult to injury brings up how difficult it is to make that decion right now. >> peter morici is a professor at the university of maryland. peter, in the last week, the whithouse has been determined to make sure the people don't call this another stimulus. it's a lot of money, is it a stimulus pn or is it not? >> it's not much s of a stimulu plan, but basically it's am political move, and they're wanting to change the name on what they do. the infrastructure spending is $8 billion for a each north, not all at once. the r&d tax credit is merely an extension of somethi already in place, an the history of tax credits is not very good, and the math smis very much against small businesses. it's doubtful they'll be

spending money, and they're the ones that need it most. the big guys are sitting on $2 trillion. this is a political move, not good economics. >> let's talk to mark preston, senior editor at cnn. i know there's been some debate tamong democrats just this pas ek about whether or not they want to support this $350 illion that the president has announced. i mean, look, democrats here in washington, ali, understand the fact that this isn't going to work. what they' trying to tell their constituents back home is this is a long-term plan. we even heard the presidennt sa that in an interview this week. the economy is in shambles, democrats are in trouble, and we're see some democrats not supporting the president, right now dankreutz says he doesn't want to see any more spending. the republicans have en successful pushing that money.

>> diane, if tax cuts are made, which ones are the most effectiveo make and which ones to make right now. and maybe cutting taxes elsewhere. at thispoint in our economy, where we've got a sputtering recovery, and we have a big, big deficit and growing debt, are tax cuts the right thing to be talking about right now? ivities actually, that's one of the things i am in favor of, extending the tax cuts. you don't want to add insill i what will be major tax increases, though not all tax cuts are equal, i don't know that we can get that granular at this stage of t the game, given the risk to the economy. this is something the govnment can do to stemmed tide of the head winds. some news w got on friday, austan goolse is replacing christine romer, now, he has

advised obama since the 2008 campaign, certainly not new to the operation. he's just being put into a new job. what we understand is tim geithner, larry summers is sticking around, most of the senior members are sticking around the the president is staying within his inner circle to replace christine romer, an will goolsbee change anything? >> no. summers is the point man and goolsbee is peerly the communicator. that's what he does well. the owner o thehe "new york times" when he picks hi editorial board wants a liberal agenda. until there's a change in the political side, that is, the the presidentvise politically, thi s won't be changes in what this administration doe >> mark, what do you think? what's the buzz about austan

goolsbee? >> i think peter is absolutely right. we're not going to see a change in economic policy. these are the same guys that got the president elected, th're following through on th econic policies. what's amazing, for the president's approval rating, of course, has dipped below that, the president hasn't done anything he didn't ll people he was g ooing to do on the campaign trail. the problem for the president is the fact that the economy is in the tank, and we have a lot of people unemployed, so economic policies will not change. >> you h on something interesting. dian no one is going to suggest he lied about anything or didn't keep promises. he kept the promises, it didn't work or hasn't work as effecttively or as quickly they would have liked it to have worked. in other words, if this economy more rho d to show a best economy this particular summer, things would be better for the democrats headingmi int this midterm election. >> no question about it.

back to 1992, it's the economy, stupid. it doesn't matter which party you're in. the bottom line is whoever is sitting in the presidential seat gets the blame for the economy and has to take responsibility for fixes it. whether or not they can is another issue. i think it's unfair to say that all of what has been done -- the fed, the t.a.r.p., the treasury -- has not done anything. the bottom line is the best we could do is stem the blood-letting. what we overprised and what this president overpromised is that we could get the private sector moving faster and get the economy moving faster on its own. >> good discussion. everybody stay right there. one party has an edge going into november's elections. that's not political analysts saying t. it's you, the american voter. i'll show you when we come back. ] marie callender's invites you back to lunch,

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party can do the better job with the economic? republicans have the edge, 46% say they can do a better job, 40% say the democrats can do a better job. mark preston is our senior political editor. with congss controlling the white house, empunyment remaining high, so much not good right now, pumark, so republica benefit by simply not being the party in power right snow. >> the i'm re my republican friends will b very upset when they see this and they'll be lling me, but the fact of the matter is they haven't put out any comprehensive plan, but the numbers seem to indicate that

will doingwi them wilt. we should see some more concrete plans, certainly economic plans, but right now they seem to be doing pretty well. >> peter, i want to ask you this, sometimes your views could be categorized as conse rvativ but i think you're an open-minded guy who looks at whatever the right thing is to look at. what can rps do better about putting forward an n economic plan, or do they not need to? >> well, keeping the powder dry will get them some seats, but might not get them a tmajority i don't know that they can win this thing without a heplan. what could they do to help? somebo that president obama hasn't done that he promised, to fix the trade deficit with china. atth's t only thing that will turn this economy around and do something for the regional banks, which still suffer.

just saying we're going to cut gulate, which i expect, will not help. there's little they can do with obama in the white house, since they won't have a reitoproof consequence. >> dianswer, let's talk about hiring, the one area that's very, very important to the economy. we had an unemploymente of numb for the month of august, which though was bad, had me hope in it that we grew private sector jobs, even though we los an awful lot of government jobs. we saw the first-time jobless benefit numbers on thursday for last week, and they we ally substantial better than people had expected, 451,000 people filed for unemployment fwen fits, fewer than expected, is there something going on in private sector hiring that mighte a bright spot? >> the only bright spot you can find is where the myth is. largepora corons who have a lotr of mon aren't hiring. they actually are hiring. it's small businesses that are the backbone that

peter mentioned earlier,he backbone that has sort of taken it on the chin. she saw bigger cuts and have not stepped up to the plate to hire again. i also think it's important we osve not talked about foreclosures and foreclosures in illinois it takes 18 months nolaws. to foreclou. i know a divorce judge instead of a short sale, why don't you let ur he fall into foreclosure? that's just obscene andin addin insult to injury to -- i thk i used that word a lot, but what's happening to the housing economy, which is one of the key issues that added reo the depth and duration of the great depression, and certainly a major headwind for the u.s. economy right now. peter, you ask a lot of people about what's the thing that will turn th economy ound. lots of people talk about jobs. you're a regular on this show. you say soming, 'ssomething, a it's often we to look at this trade deficit.

>> this week we got numbers that were surprisably better than what we akght. what's your take on that? >> a lotf thaton was aviation sales,oeing essentially, and they go right back down next month. imports are falling off not because companies are becoming more competitive, but because americans are spending less. it's another leading indicator that the third quarter could be pretty poor in terms of economic growth and even turn negative, though none of us are quite forecasting that yet. is president obama going to be forced to embrace republican economic policies if they control the house and the senate?

>> some say clinton did. you know, president obama has really got to be looking12 forwd to to 12, ali. he's on the ticket. he has to run for reelection. there might be some kind of shift correction in order to embrace some policies, but if republicans do take back congress, ali, he's not going to get much through,lohe anyway. look, he barely got the health care bill through, and that's when h held a democrat majority. so it will be interesting to see whethe republicandemocrats hold congress or not, but we won't see as manyin initiatives movin forward. good discussion. we'll keep following this. diane swonk, thanku yo for joining us. peter and mark, stick around. i want to talk about what should happen to taxes. we're putting aside the politics for a few moment and explain what you need to know.

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we try to do this as much as possible on the show. let's strip away the politics and nddebate that surrounds tax cuts and look at how they actually work or how they're supposed to work in theory. i want to start with small businesses. let's put this up here. i've used a pizza shop as an example of a small business. let's say they got a tax cut. two ways in which that money can make its way to benefit theec economy. they can hire more people, who end up with more money in their pockets, they spend and that's how thecycle starts. instead of hiring people, they might buy things, build a new restaurant, a new pizza joint, or they might buy stuff for the restaurant, new ovens, things like that. those people will have more

money to spend, as a result, that stimulates the economy. that's, in theory, how that might work. first, i want to bring in professor rose ann eigaltschuyl. tradnaeitiol small business have been the engine of job growth, do you think in theory something like that would work. in theory i think it would e work. thproblem is right now the problem with the economy is a weakness in demand. people aren't spending money. there's no demand for the products. so if i'm a business person, yes, if the price of investing goes down, then i'm going to consider investing, but i'm not necessarily going to invest i i don't think i'm going to be able to sell what i kema. >> if you're not going to sell more pizza, the availability, the money may not be the decision ker. jean sahadi also follows tax

issues for cnnmoney.com. many small businesses in this country who have to go the banks the way you and i might areru struggling to get loans from thoset banks. th sort of factors into this as well? >> it's hard for me to make a capital investment in i don't have the money. so that's a problem. there is small business lending bill tenate is hoping toake up next week. there's been a lot of stalling on it. president obama is pushing for it. es te're see how it goes. >> there aren't a lot of people get out on the streets, but there are people who point out the are important. let's see how this would play out theoretically. a company that manufactures medical equipment as an example. let's put this up on the wall. that company then gets a tax brk, and there are two ways in

which that makes it wayonnto the economy. the top line is they spend on stuff, just like the pizza place wouldhe companies that ben from that high more people and those people spend money, goosing the economy a bit or like the pizza place, they can high moreeoplf they're spending less money on taxes, and those people can go out and spend. let metart with you, roseann. there are many corporations which are hoarding cash. they've got lots of mon. not expanding unless they think >> we've got exactly the same story they're arding cash they have equipment sitting around idle. even this theory, lowering the after-cost tax of an investment should stimulate investnt. again, at the end of the line, i

have tot decide, do i want to d this? another question is the timing of ts. do i want to do this now? the provisions that obama is talking about, the expensing provision, would expiring at the end of 2011. that gives me a lot of time to think about when i want to do this investment. what i might do is say i'm ill not sure, i'm going to wait a bit, and when i see things going better, i'm going toinvestment. >> of the $350 bil lion that president obama aounced this past week, 100 would be for an extension of a w tax credit for people who engage in research and development, 200 would be if you buy equipment or you build more plant, and as y ou say, the economy is going to dictate whether those companies make those purchases. how does that money flow through the economic and hopefully encourage spenting? that graphic didn't need to be

too complicated, did it, jean? >> no, it's pretty clear. i don't have a lot of money.my if you raise my taxes i'll have less. if you keep my tax cuts in place, i know i can continue to spend. it's not like -- in fact, it will be status q. >> because we're using the word "tax cuts" but we're in fact talking about keepg taxes where they are and not making them higher. >> the taxes are scheduled to expiring, so it's a tax cut relative to what current law would have it be. go ahead. i'm sorry. >> this is the oning that absolutely in contention, the top one or two, depending on how you want to do the math, wealthy americans the top line, and that one is dangerous. they may save it, but the middle one is where it gets

interesting. maybe they'll invest it, maybe they'll invest it in a start-up business that pays a better return, and then they get to hire people. i if it were to work, that would be lovely. >> that would be lovely. the question is what kindof bang for the buck do you get when you give wealthy people for more money. as you said, alot of them are going to save it. let's say they save it, i can't guarantee to you that they're going to invest in u.s. companies. >> right, and you can't guarantee that any of us will these day. the world is our oyster, and growth is often stronger in other places. thank you for theee politics-fr explanations of the issues we're talking right now.

if you want to know more, go to cnnmoney.com he> what this fight over taxes could mean to the capitol hill power struggle and to you, when we come back. [ drums playing ] [ male announcer ] 306 horsepower. race-inspired paddle shifters. and f-sport-tuned suspension. all available on the new 2011 lexus is. it isn't real performance unless it's wielded with precision.

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we laid out how tax cuts are supposed to work, at least in theory. where to democrats and republicans assistant on this issue? peter morici is a professor, and mark preston is a cnn senior editor. who is scoring more points on the debate right now? >> clearly the republicans. at a time when we have unemployment near 10%, ali, in some states it's up to 13%, republicicans will win on econoc issues the when you talk about, as republicans are, saying we're going to take away the tax cuts, and democrats are ve

concerned. letting the t,ax cuts expire, specifically for the rich, because nobody is arguing they should expire for the middle class. there's an argument. let's listen to the president talk about cutting the tax cuts for the rich. let me atremind you that with those tax ratesce in place unde president clinton, this country created 22 million jobs and raised incomes and had the largest surplus in our history. >> so,, nketer, i think the president scores a couple points by making that particular analogy, sing we're going back to the tax rates in place under president clinton, except he wasn't dealing with the greatest financial crisis since the great depression, so spell this out

for me. is it okay what the president s saying? is it really going to hurt us, to eliminate those taxbreaks, increase the rate of taxeshat thae richest in america pay? >> first of all, it's not the people making 2, 3 and 4 million a year. it's all those small businesses where they netted $250,000, $500,000, where a husbander and wife work together and have a large capital investment in that business, it's alsoheir retirement asset. repealing those tax cuts for says folks, for families above $too,000, raises to above 50% the taxes on 50% ofne the small business income in america. mr. obama, this is not the 1990s and the high-tech boom. this is a tough economy, raising taxes, would negate anything else that he would want to do.

again, one of the difficulties we have seen in the campaign -- is people running for election, this midterm, are not necessarily on the samepa about this. i'm talking about democrats. >> and they're not. that's because president obama doesn't play the same in every state and every district across the country. maybe you'll have democrats who will not great with president obama's plan. at this point it's almost everyone for themselves if they need to criticize the president, they will. >> but republicans don't suffering from that same problem at the moment, mark. >> no, they're not in power. th can sit back, where republicans don't have to offer a lot of explanations. they just hope voters don't like what they're hearing from

decrats. >> you're not given to hyperbole. we've been hearing about increasing taxes, decreases taxes, and lots of people point back to ronald reagan cutting taxes. ronald reagan had a lot more room to cut taxes than they we do. the bottom line is we can't do that again. give me some perspective. >> well, during the bush period, he inherited a recession as well. certainly not as severe, and cutting taxes did get the economy going again, but he cut taxes on a more or less permanent basi granted they'll expire at the end of this year. obama is offering some temporary credits to help small businesses and big businesses, expense capital equipment. temporary measures don't work. they have to be permanent.

>> can i ask you why? a lot of people have made that point.ur >> sure, look at cash for clunkers temporarily it boostedar sales, then theye tanked. the whole history of investment tax edits going back to the kennedy administration is theya accelerate temporarily a then it fall off like a stone. what's more, businesses will not hi and investment if they don't see customers coming around the corner, and they simply don't see that now. mark, the president invoking president clinton and what happened under his uadministration. he's up against comparisons like peter just made, with president bush cutting taxes what does president obama have to learn from the mistake and missteps of former presidents? >> look. what president obama has to dopp right now is appeal to af very

small group of voters across the nation to help democrats.il this election will not be won -- look, democrats might n be as enthused about the election. he needs to try to get those out. the republicans are enthused. it's that small sliver, the middle of the road voter, the ed undecideds that need to come out. and probably by and large, small business owners are undecided voters, ali. >> good discussion, thank you to both. obviously we have a lot to talk about. the great immigration debate comes down to money. while some say the battle over immiatsuion is actually hurting our economy. car insurance. you know, wi progressive, you get the option to name your price is that even possible? uh, absolutely. trade? and i still get great service? more like super great. oh, you have a message. "hello." calculator hum. i'll be here all week. i will -- that was my schedule.

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you may think this issue of immigration is sort of a s.

u.s.-centered debate and shouldn't affect anything else. there's a school of thought tha if the continued battle and vitriol about immigration and, by the way, this newfound islam-ophobia could actually hurt our economy. we took a closer look at why. tap into a conversationhat you've been having lately. it's in your book, but this idea that our fear, our fear of immigration, our -- this growing phobia of immigrants and wha appears to be a negative impact is actually going to make america less competitive. >> immigrants hareve powered th economy since its inception. to the rise of semiconductors with a guy named andy grove.

half of whi the googles, the yahoo!s, the company that is power of u.s. economy were founded by an immigrant to the fact that half ofur our science and can knowledge ph.d.s come from'r foreign countries. we're it's been opened to the best and brightest throughout the world, closing the door on immigration or even mounting anti-immigrant sentiment is not good for the economy, because people with talent will stay home or go elsewhere and start those companies that we need to provide the jobs for americans. >> people are yes, ma'am and screaming about this in arizona. .

in the united states, the city with the highest percentage of immigrants is miami, about 35%, in toronto or vancouver, virtually half the people are immigrants or what we call new canadians. yeah, i think there are problems here in canada, but the problem is, should the immigrant who's driving a cab, but has a degree in dtistry or law or health care, should they be able to use their skills fully. what's really interesting, over in vancouver, which have been atacting immigrants from asia over the past 20 years, when microsoft had to built a new laboratory said we can't get the skilled people in seattle, they put that lab in vancouver, because they could bring people from asia, from india, from eupe, get them the visas and work permit putting them t be work, jobs that should have been or could have been in seattle ended up in vancouver as a result of restrictions on immigrants in the u.s. it's not a good thing for the

u.s. economy. >> there is a very emotional discussion going on in america, which may or may no be tied to this sentiment, but the growing sentiment about muslims in america. do you see evidence that that hurts us in any way? >> i think so. where there's prijudice, discrimination or backlash against any group, it chills the climate for immigrants to come to the united states. i think that has been chilling ever since 9/11. what i'm finding is a lot of stallanted people who would have come to the united states from india, china, are deciding to stay home,oi or they're going where they're welcome, whether it's australia or knew s.e.a.l.land, or toronto or vancouver, where they feel more welcome. also, with these times of crises, what i call great resets, the global flow of ambitious people shifts. one of the things that benefited

hhe united states in the 1930se we attracted the jewish-americans who helped buil or technology industries, people like albert einstein or fritz lang who helped build or hollywood industry. it's going to hurt the economy at the time we need job creation most. very interesting stuff. worth picking up and reading. . liten, imagine this. president of the united states, calls you up, sends a message, asking youix to help fix an american auto giant, and noo imagine saying no tothat? my conversation with the man who did just that and why. coming up next. you could switch for up to 600 highway miles on a single tank of gas. or the hundred-thousand mile powertrain warranty. over a thousand people a day are switching to chevy. they're not just trading in, they're trading up. qualified lessees can get low mileage lease this 2011

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ing. president obama's former auto czar steven ratner ju wrote a book, and he confirms that he asked carlos gohn, to leave those auto makers and run and try to revive general motors. he says he not only decline, but resurrected an old suggestion that general motors become part of the renault/nissan alliance. he's been approache to run ford, chrysler, even fiat, but haed o preferred to stay focusen the system he built at renault and nissan. i spoke to him earlier this week. if this is true, first of all, is it true? and if it is, why did you say no?

>> it is true. i proposed that generality motors should join the heallian, and he would not see this happening, but on the contrary, he proposed for me to take the job as ceo. with the one of the worst downturns the industry has faced in history, and i felt i can't quit. i am responsible for nissan and renault, particularly if you're in the middle of the storm, you're in charge, you have to deliver, so it was not the time to leave my present responsibilities. >> tell me what yothink, then, because you have been invited in the past to join ford and run it, chrysler, now chris her is owned by fiat, and nou w we fin out you were invited to join and

run general motors. what is the state of the auto industry in the united states? >> well, i think it's recovering slowly, but surely. think we are much better today than we were obviously two years ago. the recovery is not as strong as we would like it to be, but i think it's steadily getting there. year the industry will be around 11.5 million cars, so it's up compared to last year, and another year of growth. so i'm reasonably optimistic on the fact we're getting out of the crisis. >> let's talk about the leaf, because we're expecting tuz this end of this year, beginning of next year. do you think this is a corner we're turning? do you think we'll be in a world a few years downhes road wher there's a mass market for electric cars and everyone is driving them, plugging them? in wherever we go? >> i thk it will take a long time, ali.

our forecasts is in ten years 10% of the global sales globally will be made by zero emission cars, which are electric for the movement. because itequires a lot of investment. the technology will have to continue to develop a lot, but there is today a strong, responsible stainius demand. we're going to start do mass market the leaf in december in united states and japan. we have a lot of fund-raisers. it's going to be a long road for this technology to be a dominant technology. we're talking about 20 or 30 years. >> listen, the reason i like talking about the automotive industry, it's a major part of american culture, the american economy. where is it headed? joining us from yonkers, new york, mike quincy. where do we stand in terms of the health of the u.s. auto industry.

compare this to a yearhe and a half ago when we thought it could fall of a cliff. >> you had the cash for clunkers last year, which helped stimulate sales, but after the bankruptcy proceedings with general motors and chrysler, i think you saw all of detroit cutting overhead, getting leaner, being real tig about production and i think that has trickled down to the dealer level where you don't see acres and acres of cars the dealers can't sell, and that cuts into the profit margin. detroit is geing better at el making more money selling fewer ca. >> you know, we can put aside what it means for the industry and dealers and workers, but in some ways, amerineca going to benefit because we're seeing dift cars. cars we didn't see. cars that make it more interesting to drive a fuel efficient car. >> it's going to be a long time before you see mass produced electric cars, but when you sigh

something like the volt coming out, ford is talking about their focus that's out soon as well. it's at least a step in the right direction, but when you just consider the basic internal combustion engine, there's still a lot of efficiencies that the automakers can gasoline from there. >> when we would talk about electric cars, we were talking about that compared to largely a fleet of not so efficient gas vehicle, where as now, that debate gets dulled by the fact there are cool, europe-styled cars coming into the market. >> consumer reports is testing a few. ford fiesta, it's a european designed car that has done fwhel europe and now, it's in the united states. we haven't finished our test yet, but it's promising. morengaging than the small american cars.

i think the only thing you need though is the price of dpas to go up a lot higher before people are standing>> in line. >> i always do this. i remember something on tv i should remember earlier. i was watching the nissan leaf commercial with the polar bear who was out there getting weathered out of its environment. are people buying these cars because of the threat of higher gas prices? is it decision or has it become cooler to do so? >> the sales numbers show that more people are going back to suvs, crossovers, pickup sales are up. when gas is relatively cheap in the united states, again, we're nowhere near the fuel prices in europe and japan but when gas is cheaper in the united states, americans buy bigger vehicles. detroit is hedging their bets by producing smaller cars, like the

cruise. i don't think you're going to see a lot of people. i think america has a short-term memory. >> that's right. good tsee you. the automotive specialist at consumer reports. you want to see what's coming up next? happy thoughts. happy thoughts about the economy when there's so much negative talk.

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as we often try and bring you on this tv show, we give you

some diversity about opinion about the economy. not all is doom and gloom. so, i want to leave you positive thoughts. this week's number was lower than expected. 45000. we need to get below 450,000. hopefully below 400. that's still high, but the lowest number since july. then there's the trade deficit. the difference between what we import and buy from other countries. usually, we impo a lot more than we export. the u.s. trade deficit dropped sharply last month due largely to the fact we are exporting record numbers of goods. as peter pointed out, not everything about tt good either, but it's an indicator, at least in the right direction. one of those goods, farming products, there are developing economies like brazil and china

who are buying more of what we grow. in fact, china is set to become the second biggest buyer of goods produced on american farms. canada is the biggest. then there are mergers and acquisitions. n uptick in the ie number of countries buying other countries. that's important. it's a sign that people who run those companies think the ones they are trading are less than they're worth. that's an interesting sign. and we keep talking about the fact that manufacturing is down in america, but in august, it was actually up. not manufacturing jobs. although there was an increase in temporary work at these facilities, and that should follow when you compare that with the trade deficit. there should be jobs show iing in that sector at some point, so

all these little bright spots